Common Stock: Kepler Weber (KEPL3)
Current Market Price: R$ 41.48
Market Capitalization: R$ 1.1 billion
*All values in this article are expressed in Brazilian Reais (BRL) unless otherwise noted.
**The bulk of this analysis is based on the company’s most recent audited financial report, which can be found by following this link.
Kepler Weber Stock – Summary of the Company
Kepler Weber is a Brazilian grain storage manufacturer. They produce equipment for the storage and handling of agricultural grains such as silos, dryers, and conveyors. They also offer after sale maintenance and technical assistance services. Their client base includes agricultural producers, trading companies, as well as medium and large enterprises. They have clients in Brazil and also export. Kepler Weber was founded in 1925. They have 2 manufacturing units in the south of Brazil and their corporate headquarters is located in Sao Paulo.
Revenue and Cost Analysis
Kepler Weber had revenue of R$ 583.5 million in 2019, an increase from R$ 576.3 million in 2018. Their COGS was R$ 438.2 million in 2019, representing a gross margin of 25%, a significant increase from 14% in 2018.
The company was profitable in each of the last two years. In 2019 Kepler Weber had net income of R$ 37.5 million, representing a profit margin of 6.4%, an increase from 1.4% in 2018.
Balance Sheet Analysis
Kepler Weber has a solid balance sheet. They have sufficient liquidity, a solid asset base, and reasonable liability and debt levels.
Kepler Weber – Debt Analysis
As of year-end 2019 Kepler Weber has R$ 40 million in total debt outstanding, R$ 24.3 million of which is classified as current.
Kepler Weber Stock – Share Dynamics and Capital Structure
As of year-end 2019 the company has 26.3 million common shares outstanding. Institutional investors and insiders own around 70% of the company with the remaining 30% being owned by smaller shareholders with an ownership position of less than 5%.
Kepler Weber Stock – Dividends
Based on 2019’s results Kepler Weber paid a dividend of R$ 0.383 cents per share. At the current market price this represents a dividend yield of 0.9%.
Kepler Weber Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
R$ 208.7 million / R$ 467.3 million = .44
A debt to equity ratio of .44 indicates that Kepler Weber uses a mix of debt and equity in its capital structure, but is not highly leveraged and relies more heavily on equity financing to fund itself.
Working Capital Ratio
Current Assets/Current Liabilities
R$ 372.8 million / R$ 177 million = 1.7
A working capital ratio of 1.7 indicates sufficient liquidity. Kepler Weber should not have problems meeting its near term obligations.
Price to Book Ratio
Current Share Price/Book Value per Share.
R$ 41.48 / R$ 17.76 = 2.3
Kepler Weber has a book value per share of R$ 17.76. At the current market price this implies a price to book ratio of 2.3, meaning the company’s stock currently trades at a premium to the book value of the company.
Brazilian Agriculture Market – Economic Factors and Competitive Landscape
Brazil is an agricultural powerhouse, it ranks 5th in the world in terms of arable land. Agriculture is a large and important industry for the Brazilian economy. Brazil is the world’s largest producer of oranges, sugarcane, and coffee. They also compete globally in the production of soy, meat, and corn. Brazils’ diverse geography allows it to produce a wide variety of crops.
Global agricultural is a highly competitive market subject to large swings in global commodity prices. Brazilian agricultural companies will have to compete fiercely on a global stage for exports. However, given the scale of the industry in Brazil, I believe it is reasonable to assume that there are many well run, investable agriculture companies in Brazil.
Kepler Weber Stock – Summary and Conclusions
Kepler Weber stock is an interesting option to gain exposure to the Brazilian agriculture market. The company has a long history of operating in Brazil and derives relevant revenue from exports. They are in a healthy position financially with sufficient liquidity, low leverage and debt, and have been profitable in each of the last two years.
I am very intrigued by Kepler Weber’s business. However this is the first grain silo manufacturer I have analyzed, so I will need to do more research about the business and products before making my investment decision. I will also be interested to see how the company performed in 2020. Kepler Weber is a unique business, so it will be hard to make direct comparisons to other Brazilian stocks. But investors can consider other Brazilian agriculture stocks, such as Brasil Agro, when studying Kepler Weber stock.
This is not investment advice. Nothing in this analysis should be construed as a recommendation to buy, sell, or otherwise take action related to the security discussed. If I own a position in the security discussed, I will clearly state it.
This is not intended to be a comprehensive analysis and you should not make an investment decision based solely on the information in this analysis. I hope this serves as a useful starting point for a more comprehensive analysis, and hopefully draws attention to aspects of the company that were overlooked or merit further investigation. This is by no means intended to be a complete analysis. Again, this is not investment advice, do your own research.